By Jeff Siegel
Something doesn’t add up here…
A recent Energy Department report has suggested that wind power will be cheaper than natural gas-generated power within 10 years. And that’s without a federal tax incentive.
Sounds good. Certainly I love hearing about renewable energy competing with fossil fuels in the absence of subsidies.
Yet here’s the weird thing…
While the DOE report states that wind can be the cheapest, cleanest power option in all 50 states by 2050, the Obama administration is pushing to not just renew the wind energy production tax credit but actually make it permanent.
That’s the problem with those pesky subsidies: Once they appear, they’re hard as hell to get rid of. Certainly that’s been the case for the nuclear industry, fossil fuels, and farm subsidies.
I would hate for the same to happen to renewables.
A Shot of Steroids
Understand, I’m not anti-wind. In fact, I’m very much pro-wind, as wind power has proved to be a valuable component of our energy economy. In fact, in some states, wind is a major player.
The state of Kansas gets 19.4% of its electricity from wind. South Dakota gets 26%, and Iowa gets a whopping 27.4%. Also worth noting is that Texas now boasts enough wind generation to power more than 3 million homes.
Still, on a national level, wind only represents a little more than 4% of our overall power generation. So if the DOE believes it could be as high as 35% by 2050 well, that’s some serious growth potential.
Now, I’ll be honest…
I tend to be skeptical of DOE reports in general. Not because I think something shady is going on (although there’s certainly an argument to be made for that) but because the technological progress that has launched the renewable energy industry into mainstream status is rarely figured into the department’s equations.
Which makes sense. Certainly you can’t quantify something that doesn’t yet exist.
However, if we look at how quickly solar and wind technology has advanced over the past 10 years and then look at how quickly it’s going to advance over the next 10, I don’t think a 35% share is out of the question especially when you consider that coal will provide less and less along the way. Natural gas and renewables are certain to fill the void.
Now, while I’m not a fan of subsidies for any form of energy this includes nuclear and fossil fuels I do know that if the wind energy industry gets a bone thrown its way this year in the form of a long-term extension of the production tax credit, you can be sure the growth in wind will get a serious shot of steroids.
Of course, that being said, even if the wind energy industry is kept away from that big trough of tax dollars that feeds every other energy industry, it will continue to gain ground albeit not as fast.
How to Play it
For investors, there are a few ways to play the wind energy market.
The most obvious is through wind turbine manufacturers. The main publicly traded players here are:
- GE (NYSE: GE)
- Siemens (OTCBB: SIEGY)
- Gamesa (OTCBB: GCTAF)
- Xinjiang Goldwind Science & Technology (OTCBB: XJNGF)
- Nordex (OTCBB: NRDXF)
- Suzlon (NSE: SUZLON)
- Vestas (OTCBB: VWDRY)
You can also invest in wind farm developers, most of which come in the form of yieldcos and are rarely pure plays on wind, as many also include solar assets. Some of these include:
- Hannon Armstrong Sustainable Infrastructure (NYSE: HASI)
- TransAlta Renewables (TSX: RNW)
- Pattern Energy Group (NASDAQ: PEGI)
- Abengoa Yield (NASDAQ: ABY)
- Brookfield Renewable Energy Partners (NYSE: BEP)
Say what you want about the integration of renewable energy, but there’s no doubt that wind power is a cat that will never get back into its bag. It’s a valuable source of power generation all across the globe, and its growth in the U.S. will continue with or without government support.
To a new way of life and a new generation of wealth…
Jeff Siegel is Editor of Energy and Capital, where this article was first published.
